The land market is becoming increasingly polarised – Gabriel Roscrow, UK Land Advisor
Summary
1. As the residential property market begins ‘second slip’, the land market is becoming increasingly polarised.
2. The opportunity now lies in taking advantage of bulk land in the best locations to deliver service land product.
3. Green field land values increased by 25% over the last year, along with urban land values increasing by 13%.
4. Residential land values continue to perform well. A shortage of housing supply and a steady influx of overseas cash into the housing market had led to competition for residential development sites.
5. Expect the value of serviced plots and serviceable land to grow over the next few years. The supply of this type of land is likely to become increasingly constrained following uncertainty and some hiatus in the planning system, in time driving up prices.
As the residential market begins to show signs of a second slip, the land market is becoming increasingly polarised for the second consecutive quarter. It was up 2.4% in the third quarter of 2010, values have increased while urban lands grew by just 0.2%.
This reflects not just the underlying weakness in the housing market, but also the dearth of debt funding, uncertainty around the localism agenda and shortage of long term equity. With public sector austerity measures now taking effect house builders and developers remain selective in their land purchasing activity.
A permanent rift
The national picture disguises some key trends, not only in terms of location, but also by type of site. A permanent rift is opening up between the value of small, serviced sites for which demand is strong, and large, strategic regeneration sites and bulk land, which is seeing little trading activity. The opportunity lies in taking the larger, longer term sites and converting them into a de-risked, serviced product appealing to the new, cautious market.
Green field land values increased by 25% over the last year, along with urban land values increasing by 13%.
Residential land values continue to perform well. A shortage of housing supply and a steady influx of overseas cash into the housing market had led to competition for residential development sites.
The opportunity lies in taking the larger, long term site and converting into de-risk, serviced product.
We expect the value of serviced plots and serviceable land to grow over the next few years. The supply of this type of land is likely to become increasingly constrained following uncertainty and some hiatus in the planning system, in time driving up prices.
Location is key. Funding will only be forthcoming for the best sites where local housing demand will sustain targeted new delivery. Difficult sites in lower value areas requiring any kind of major remediation will remain off the development radar for some time to come.
In the short to medium term, opportunity lies in adding value to bulk land by converting into serviceable land, or fully serviced plots. Players will need to actively invest in land to maximise values, delivering an easy-to-develop, de-risk serviced product to the market.
Check out our investment land available in the UK Land Agent land directory.